Mitra said FMCG earnings growth, which has been stuck in mid-single digits over the past two years, is now accelerating. Input costs such as crude, palm oil, tea and copra have moderated meaningfully, helping margins.
“When do we really start seeing this happen? It’s here and now. In our preview for the third quarter, you would see that there are large number of stocks that we cover where we will for the first time, see double digit revenue growth in a long time,” he added.
He noted that several FMCG companies are likely to report growth in the December quarter — something not seen for a long time.
Mitra remains cautious on most discretionary segments. Jewellery is the clear exception, where demand continues to remain strong.
However, low-ticket discretionary categories such as QSR, fashion and footwear are still struggling. He pointed to weak demand visibility, rising competition, digital disruption and ongoing earnings downgrades as key concerns. Valuations remain high even as earnings expectations continue to get cut, which limits upside.
Mitra also touched upon the alcoholic beverage (alcobev) and fashion industries. He noted that the alcobev sector faces challenges from state-specific tax increases and the risk of further tax hikes due to soft GST collections, making conventional FMCG a more attractive bet.
The fashion industry, he added, is grappling with both soft underlying growth and intense competition from digital platforms and deep-value players. “This combination of soft demand, high competition, digital disruption is something which I think companies will have to navigate through,” he concluded.
For full interview, watch accompanying video
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